Four years after Madrileña Red de Gas opened for business, we can say that we have achieved most of the goals we set ourselves when we created our new independent gas distribution company. Our goals revolve around the themes of gas as a clean, versatile energy source, a commitment to outstanding service quality to consumers, and forging ties with our host community through network expansion and ongoing in-house improvement.

As an independent gas distribution company, we must comply with our duties under the law and, furthermore, honor our commitment to serve our consumers to the promised standard. We are also accountable to our shareholders, and must meet their legitimate expectations of the company’s performance.

We are aware that the role of gas in the energy mix is vital to the transition to a model that carries decreased geostrategic risk and makes the right fit with environmental policy. Madrileña Red de Gas believes that distribution companies have a crucial part to play in extending their networks to make natural gas accessible to a wider section of the population, thus supporting this transition and helping to replace fossil fuels, which are less versatile and more pollutant. The use of gas instead of other fuels brings major savings for consumers and the domestic economy alike by bringing down the end-cost of energy usage.

Our commitment takes into consideration all these concerns and is enacted in our home territory, the Madrid region, to which we are still closely tied. In our ongoing efforts to extend our business to further municipalities, we work side-by-side with the Madrid regional government in schemes to replace energy facilities and fuels. Having opened for business in 38 municipalities originally, we now operate in 59 municipalities , and intend to extend our network still further.

Our overarching commitment is to our consumers. Madrileña’s main goals are service safety and quality. This means we focus on how rapidly we can respond to emergency calls and queries, and on shortening our response times to connection requests and troubleshooting incidents. Our performance indicators have consistently improved year on year, and our aim is to maintain this trend. The feedback from our consumers suggests we are on the right track, and encourages us to continue in our efforts.

We continue to implement ongoing improvements in productivity and organizational efficiency by scrutinizing and optimizing our processes. This is not merely a conceptual or design-driven task: we keep a constant watch on both the broad issues and what might seem to be minor details, which, taken together, amount to genuine steps forward, and feed into our safety, quality and financial efficiency indicators. A good example of this is the way in which we have restructured our financing in the wake of taking over several companies: which enabled us to streamline financial expenses and achieve a very robust credit rating.

*Since we are the leading independent distribution company and are not vertically integrated with any other business, we can afford to focus very tightly on attaining excellence in the single thing we do. This sharp focus and the strategies outlined above have led to real progress in our performance, as shown in the following pages. This year, once more, we have not only met but exceeded expectations and the annual budget.

Our business is subject to government regulation. The central government recently introduced statutory reforms – which are already in effect – to ensure that the incipient shortfall faced by the gas system as a result of the revenue/cost mismatch is adequately contained and does not lead to serious trouble over the medium term. We trust that the reforms will maintain the conditions that have so far enabled regulated businesses, including our own, to develop in a business-friendly climate that attracts investment, constrained only by the general law and underlying regulatory principles. We are also confident that the recovery of the Spanish economy, which appears to be corroborated by an increasingly wide range of indicators, will help to drive our growth, supported by the expected upswing in demand for natural gas across all consumer segments.

Once more , it falls to me to acknowledge that this strong performance is owed to the dedication, professional competence and unflagging motivation of our people – they are the bedrock of every improvement plan, and they merit my sincere recognition and thanks. We are counting on them to continue upon the path of ongoing growth that we are determined to follow.

To summarize our strategic vision for the future, we believe that gas is a competitive energy source which will play an ever-increasing role going forward. The business shows high growth potential in view of the low penetration in Spain compared to our neighboring countries., and we are committed to realize this potential while delivering safety and service quality to our consumers. Finally, against a background of regulatory stability over the medium and long term, we trust that our business will develop and grow to the full satisfaction of our consumers, and shareholders and institutions.

Pedro Mielgo

Chairman